Summary The colonization and lignin decomposition of pine (Pinus thunbergii and Pinus densiflora) needle litter by an endophytic fungus, Lophodermium pinastri, was examined with field observations, a field experiment and laboratory experiments. In pine needles collected from the field, needle mass per length and lignin content were lower in needle portions bearing Lophodermium fruiting bodies than in the remaining needle portions, whereas total carbohydrate content was not different between them. Total and live hyphal lengths were greater in needle portions bearing Lophodermium fruiting bodies than in the remaining needle portions. Lophodermium fruiting bodies were not formed on sterilized needles after a 6-month incubation on the forest floor, whereas they formed on 20% of non-sterilized needles, indicating that this fungus can only colonize live needles on the branch. In pure culture decomposition tests, mass loss of lignin was detected for several isolates of L. pinastri, but was variable among isolates and between the needles of two pine species. A comparison of the rDNA-internal transcribed spacer sequences between L. pinastri isolates of P. thunbergii and P. densiflora indicated that the two groups were phylogenetically separated. This study is the first to show that L. pinastri has the ability to decompose lignin in dead pine needles.